ECON, INC. v. ILLINOIS BELL TELEPHONE COMPANY

United States District Court, Northern District of Illinois, E.D

November 27, 1972

ECON, INC., AN ILLINOIS CORPORATION, FOR AND ON BEHALF OF ITSELF AND ALL OTHERS SIMILARLY SITUATED AS A COMMON CLASS, PLAINTIFF,v.ILLINOIS BELL TELEPHONE COMPANY, A CORPORATE PUBLIC UTILITY CHARTERED BY THE STATE OF ILLINOIS, DEFENDANT-THIRD PARTY PLAINTIFF, V. UNITED STATES OF AMERICA, THIRD-PARTY DEFENDANT.

"(f) Common carriers and communications
companies. — No tax shall be imposed under section
4251 on the amount paid for any toll telephone
service described in section 4252(b)(2) to the
extent that the amount so paid is for use by a
common carrier, telephone or telegraph company, or
radio broadcasting station or network in the
conduct of its business as such."

Econ's claim is based upon the contention that the service
provided to it falls within Section 4252(b)(2) rather than
4252(b)(1) and is therefore exempt from taxation. The
telephone company and the Government argue to the contrary.

The defendants say that the plaintiff primarily seeks a
refund of a federal tax, with incidental injunctive and
declaratory relief. They argue, and plaintiff appears to
concede in its reply brief, that plaintiff cannot sue for a
tax refund in either a federal or a state court without first
filing a claim for a refund with the Internal Revenue Service,
26 U.S.C. § 7422. There is no allegation in the complaint that
a claim for refund was filed. If this is indeed a suit to
recover a federal tax refund, the absence of such an allegation
is a fatal jurisdictional defect. 26 U.S.C. § 7422(a); England
v. United States, 261 F.2d 455 (7th Cir. 1958); Agron v.
Illinois Bell Telephone Co., No. 67 C 2041, decided August 4,
1969 (N.D.Ill.). Moreover, a state court has no jurisdiction to
entertain an action to recover federal tax payments, because
the United States has waived its sovereign immunity from suit
only for tax refund actions brought in the federal district
courts or the Court of Claims. 26 U.S.C. § 7422, 28 U.S.C. § 1346.
Removal from the state court does not cure the
jurisdictional defect. Minnesota v. United States,
305 U.S. 382, 388, 59 S.Ct. 292, 83 L.Ed. 235 (1939).

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